WHY THE UAE IS THE FIRST CHOICE FOR INTERNATIONAL BUSINESSES.
The UAE has a vibrant free economy with a significant proportion of revenues arising from exports of oil and gas. Successful efforts have been made to diversify away from dependence on hydrocarbons and a solid industrial platform has been created together with a strong services sector. The establishment of free zones has been an important feature of this diversification policy and the reform of property laws gave a major boost to the real estate and tourism sectors.
The UAE has been ranked 27th in the World Economic Forum’s Global Competitiveness Report 2018. Considering the new methodology for ranking, UAE’s main strengths are its excellent transport infrastructure [12th], ICT adoption [6th] and macro-economic stability [1st]. In addition, its institutions guarantee a high level of security [9th] and it has one of the most efficient public sectors in the world [5th]
The UAE has established a council of competitiveness to enhance efforts to achieve sustainable development through the setting up of legislative frameworks and the provision of developed infrastructure that will further enhance the country’s status as a regional and global destination for investments. The council continues its communication with government agencies and the private sector through workshops and meetings, to coordinate efforts and explore ways to further enhance the competitiveness of the country.
According to the World Bank’s 2018 Doing Business Report, the UAE tops the MENA (Middle East & North Africa) chart for ease of doing business. So what is the UAE doing right? Why is it such a great place for international businesses to incorporate? What does it offer over and above neighboring countries in the region?
Let’s take a closer look at its strategic and practical advantages.
Economic and fiscal policy
Since the early 1980s, the two main economic objectives set by the UAE government have been to reduce reliance on hydrocarbons and boost private sector investment. This strategy is being followed diligently in an effort to offset the country’s vulnerability to fluctuations in oil prices and to propagate economic growth and stability.
The fact that there are no restrictions on current and capital account transactions, helps to implement these objectives as does the fact that foreign entities repatriate dividends, profits, interest or royalties without restrictions, with the exception of foreign banks which are required to obtain the Central Bank of UAE’s approval.
The UAE aims to promote free trade with minimum restrictions on foreign trade and investment.
The policy of the UAE government to encourage foreign investment is always evidenced with new and impressive industrial and commercial developments frequently announced.
Security and stability
The UAE is enjoying political stability. This has enabled the implementation of sound economic policies reinforcing the country’s social structure to develop one of the most tolerant, prosperous, secure and safe societies in the world. Dubai and Abu Dubai have been ranked the top two cities in the Middle East region for quality of life, according to latest editions of global surveys. Long-time investors include a wide range of multinational companies headquartered across the globe.
While strict laws do exist in accordance with local customs, the vast majority of them are designed to preserve a more modest way of life, They also go a long way to discourage openly aggressive or indecent conduct– which may be a welcome change for young families relocating from other cities across the world. That said, compared to a lot of other MENA countries the UAE is one of the most liberal in its attitudes and outlook. Progress and modernization thrive here – in many different ways.
Tax efficient business environment
Special economic zones and free trade zones offer 100 percent ownership, repatriation of capital and profits as well as exemption from taxes. Outside the free zones, significant incentives are made available to investors and corporate governance rules are in place to ensure security, transparency and accountability. Corporate taxes are reserved only for branches of foreign banks and oil producing companies. A small 5 percent tariff is imposed on goods imported from non-GCC countries, except tobacco and alcohol products which are subject to 50 -100 percent customs duties. 5% VAT is also applicable for onshore companies.
The favorable tax environment, a multicultural lifestyle, a diversified and resilient economy and so many other factors behind the number of talented people already living in the UAE – from all over the world. From lawyers, accountant, consultants, digital marketers, engineers and many more – there is no shortage of experts working here.
The UAE’s approach to the business-friendly environment encourages investment, employment and entrepreneurship, attracting new businesses and encouraging corporate migration. Re-domiciliation to the UAE is an attractive proposition due in no small part to the favorable tax environment, the region’s world class infrastructure and the fact that transfer of incorporation is made as easy as possible.
Proximity to growth regions
The UAE’s strategic location between Asia, Europe and Africa is a major advantage to investors, particularly the country’s proximity to some of the world’s fastest growing economies in Asia. India and China alone comprise almost 40 percent of the world’s total population with a combined GDP in excess of US$6 tn, providing significant economic and trading opportunities.
Intellectual property protection
Intellectual property, including patents and trademarks, is legally protected. The country is also a member of international organizations, treaties and conventions that safeguard intellectual property, including the World Intellectual Property Organization (WIPO), the World Trade Organization (WTO), the Paris Convention, the Patents Cooperation Treaty (PCT), the WIPO Copyright Treaty, the WIPO Performances and the Phonograms Treaty (WPPT) and the Rome Convention.
Multinational human resources
Investors benefit from an abundant supply of human resource skills, readiness of professionals migrating to the emirates from nearly every country on the globe, as well as an increasing number of UAE nationals that are joining the private sector.
Infrastructure in the UAE is second to none. Telecommunications, including mobile telephony and land lines as well as internet access are at least as good as that of the world’s largest international business hubs. The road network is constantly upgraded, and ports and airports are of world class standards. The UAE is creating one of the world’s biggest and most efficient cargo handling centres. To date, the government has invested heavily in infrastructure development, and it has also opened up its utilities and other infrastructure to increase private sector involvement.
Efficient government services
E-government websites, free trade zone authorities as well as chambers of commerce and industry provide new entrants with helpful information and guidance.
There are many industry-specific hubs where related companies cluster. These include media, marketing, healthcare, finance, maritime, and education organizations – among many others. As a result, the types of business incentives offered are tailored to each sector. These typically include:
- 100% foreign ownership
- long-term corporate tax exemptions
- full capital repatriation
- personal income tax and import-export tax exemptions
- quick incorporation with a single point of contact for administration, and human resources services.
Owing to the different, but often similar-sounding propositions each area offers, it makes sense to work closely with a reputable incorporation agent who can help your business navigate the myriad of incentives.
With the intention of decreasing reliance on petroleum revenues, the UAE is developing a reputation as one of the world’s leading tourism destinations. According to recent UAE yearbooks, tourism is worth more to Dubai than its oil income. Amongst the projects aimed at developing the tourism industry is the annual Dubai Shopping Festival, a one-month event of entertainment and shopping promotions that draws visitors from all over the world. Various construction projects, which are at different stages of completion, will substantially increase the number of hotels in the UAE with many of these being situated in unique developments such as “The Palm” and “The World”, which are man-made islands off the coast of Dubai.
Future potential of the GCC
- The region’s large and mostly young population is expected to grow at a rate of 1.4 percent over the next decade
- According to Goldman Sachs, the region is expected to overtake the United States of America as the world’s second largest economy by 2050
- At an average oil price of US$50, the present value of the GCC’s oil and gas exports is assessed at US$18.3tn
- The privatization pipeline in the region is expected to be more than US$900bn over the next 10 years
- Global infrastructure demand is to reach US$60tn by 2030 according to OECD estimates
- There are US$2.4tn worth of infrastructure projects in the GCC, while India has approximately US$1tn in major infrastructure requirements
- The Islamic finance industry took 40 years to reach US$1tn in assets (where it is today) but will take only 4 years to reach the US$2tn mark
Having summarized the merits of doing business in the UAE in general, it is evident that Whether you’re looking to set up an international business presence for yourself or your clients, regardless of where you live or your industry, if you’re looking to incorporate in the MENA region, the UAE is a strong contender. In short, the infrastructure is in place for anyone to easily establish a fully functioning corporate entity in a short amount of time and quickly reap the rewards of a truly international environment in a safe, stable, and forward-thinking nation.